Good Morning, Heather.
We are a federal credit union. In the past, whenever a member has caused a loss to the credit union, we have charged off their loans and closed their account no longer allowing them to be a member of the CU unless they pay us back in full. We have never had a policy on this, it has always been a procedure. So my question is…is this ok to continue to do? Do I need a policy in place? Or put something in our membership booklet? Is this technically a expulsion thing that would now need to go to the board?
- (A) a substantial or repeated violation of the membership agreement of the credit union;
- (B) a substantial or repeated disruption, including dangerous or abusive behavior, to the operations of a credit union, as defined below; or
- (C) fraud, attempted fraud, or conviction of other illegal conduct in relation to the credit union, including the credit union’s employees conducting business on behalf of the credit union.
You’ll notice that “causing the credit union a loss” isn’t specifically mentioned in the FCU bylaws. However, one of the “for cause” reasons may still apply. For example, your Membership Account Agreement may include language that allows for restriction or termination of an account if accounts are misused or if the termination or restriction is reasonably necessary to prevent a loss.
But even then, you should tread carefully. The commentary to the FCU bylaws state the following: “A credit union is prohibited from expelling a class of members under this provision. That would include a board acting to remove all delinquent members or class of delinquent members”
So automatically expelling members for delinquency is not permitted under the new FCU bylaws, and expelling members for delinquency in any circumstance was never allowed under the old bylaws. You will need to evaluate each delinquent situation on a case by case basis to determine if you have “a substantial or repeated violation of the membership agreement” or another “for cause” reason (like fraud) before terminating membership rights.
Restricting services to a delinquent member is a possibility as well. However, the FCU bylaws also require you to have one of the “for cause” reasons stated above to restrict an account and to adopt a policy for restricting services.
Finally, you have always been able to expel individual members for any reason by calling a special meeting and getting a 2/3 vote to expel, but understandably, that’s a difficult path to pursue.
